WALL STREET IS UNDERSTAFFED

Jared Dillian
Rank: King Kong | banana points 1,697

I saw something on Twitter the other day that said that Goldman had 600 cash equity traders in 2000 and has 2 today. Not sure how accurate that is, but that would not surprise me in the least. Automation and such. We have heard it before.

And people are looking to automate EVERYTHING on Wall Street. Another piece about Goldman, that Matt Levine wrote about, about how the firm is trying to automate a bunch of different investment banking functions. There goes the analyst class, printing pitchbooks. So for sure, a lot of these jobs are going away, have gone away, and are never coming back.

But you can also make the argument that the Street is a bit understaffed. When it's gotten to the point that one person is responsible for 10,000 different bonds, it's gotten a little ridiculous. Get rid of Volcker, and there are plenty of opportunities to make money.

Banks are still firing. They aren't even firing on the lows, they are firing on the first uptick, which is crazy. My view: they're going to have to hire everyone back in two years.

Two years. Give it two years. They will be hiring people hand over fist.

It will be back to the old days of recruiting, where it's a complete food fight to get the smartest kids, where candidates can play the banks against each other. All the old recruiting events with Miller Lite and chicken-on- a-stick. It's coming back. And pay is going up, too, I can pretty much assure you of that.

Now, the types of things that people will be doing will be different than what they did 10-15 years ago. Nobody really needs to hire a trade assistant. Or someone to print pitchbooks. But there are value-added things that you could hire people to do. What, I don't know. I'm not smart enough to figure that out. But it's pretty easy to spot the bottom in something, and it's even easier to see when an industry is firing people on the lows.

Now, the old saying was that the banks would fire people on the lows and hire people on the highs. And that hasn't happened for the last eight years, because there hasn't been a low! It has just gotten worse and worse. But you can't tell me that things aren't getting better. Trading revenues are already improving. Just you wait--the banking business is going to get unimaginably good.

Wait and see...Business Insider is going to be doing a piece about this in a year or two, about how banks have increased their recruiting efforts. Then there will be a lot of buzz about careers on Wall Street again. Take a look around the trading floor. My guess is that the average age is over 40. That's not normal. It wasn't like that when I worked on the street. The average age was 27. The Street has gotten really old because all the old-timers have been clinging (with varied success) to these jobs. In addition to getting bigger, I suspect that Wall Street is going to get a lot younger.

Let me know when that BI/Bloomberg article comes out. I'll be happy to say I told you so. I'm not just bullish on bank stocks, I'm bullish on bank people, and bank culture. It's back.

Mod Note (Andy): This post is an adaptation from the February 21th edition of Jared's Daily Dirtnap Newsletter. If you'd like to read more, WSO readers qualify for a $100 discount to his Daily Dirtnap daily market newsletter...just email [email protected] and mention "WSO Monkey Discount". You can follow Jared on twitter at @dailydirtnap.

Comments (26)

Mar 8, 2017

Hah.

Look at the oil industry...they're starting to hire everyone back after 1-2 years of firing everyone...

Mar 8, 2017

Oil and Gas is a completely different animal. Rigs are 85% analog pre-lows and just now seeing companies move into the automation space for rig inefficiencies. They aren't quite hiring back that much though. I would argue that there is only slight uptick and hiring is for mid-level to juniors, not the senior drilling engineers that were making $350k a year pre-price low.

Headcount cuts will continue and it will stay at this level for a while. Pay may increase, but headcount will only increase slightly, mainly to retain the talent that can produce at high levels. Not only is automation leveling the playing field but trading, sales, back office, clearing, stuff that is a clear automation target will not be rehiring partly a function of the buyside shrinking as well as we move to more passive fund management, less wallet share to pay all these brokers.

If I'm completely wrong, great, I will make a killing and have more colleagues... If I am right, I may be the one getting laid off, who knows.

.

Mar 8, 2017

Over hire over fire.

I saw a lot of new engineers get jobs. A friend flew to OK this week and got an offer from Halliburton same day. My facebook feed offers potential job offers also.

Uncle also apparently was getting calls to come back to the tune of 300k+ p/y as an offshore consultant.

Someone needs to make manage run and sell these programs.

Mar 8, 2017

I think certain parts of oil and gas will / are hiring again but it is likely to be more measured given the forward looking price decks which render most offshore projects uneconomical at current 5 year strip. I think furthermore there were some automation gains especially on the land side that will sustain a lower need for rig / field focused personnel in the future.

Mar 8, 2017

I'm bullish on everything people. Another Tesla crashed this weekend because of failed automation; the super duper awesome Samsung Note with all the bells and whistles literally blew up in our face; and I still want to kill any recording that answers my calls. People always work better with technology, but it's never the other way around. And when robots become commercialized, there will always be that large handful of companies making a compromised product to save on cents and improved bottom lines. People are idiots, but I'm betting on the consequences of cutting corners.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

Mar 8, 2017

Remember this is version 1.0, maybe 2.0... and technologically can improve exponentially. 5-10 years from now what version will we be in...? It depends on the industry but i'll take the robots in many cases. Something will need to be done related to decoupling income from work, great discussion in here for those that haven't seen it http://www.wallstreetoasis.com/forums/how-do-we-de...

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

Mar 8, 2017

I disagree that the technology can improve by a large degree. Broad evidence contradicts that statement, and in fact tech innovation seems to make only incremental improvements as of recent. Structurally, the industry is very underdeveloped and that's the only reason companies like Snap really are able to sell billions in securities, on the basis of unproven growth. Eventually, people will have to accept these are not real businesses and stop betting on them, at least until they have a profitable platform.

With that said, people that are able to create the technology, still need a realistic surrogate to help on the business side. People that create can't just keep creating on the basis of 'Evan Spiegel is the next genius'.

If I can become a real coder and build a useful tool or piece of software, I will do it. But to say that people are going to get edged out, it just doesn't look like that will happen. But, I don't know everything and can't say that I know this to a 100% degree of certainty.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

Best Response
Mar 8, 2017
iBankedUp:

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p>I disagree that the technology can improve by a large degree. Broad evidence contradicts that statement, and in fact tech innovation seems to make only incremental improvements as of recent.

You say this, while typing on a device that has benefited from vast improvements in computing power and programming over the last 10-20 years. If you typed that on a phone, you can thank vast technological improvements in data transmission for the fact that you didn't have to wait 5 minutes for the page to load, as you would've on the 2G networks we were all using 10 years ago. You say this while talking about the recent failure of a Tesla, forgetting that even 10 years ago, it would've been impossible to make that complaint because cars couldn't even back out of the driveway on their own, let alone make it far enough down the road to get into an accident.

And let's not forget that 30 years ago, commenting on this forum would have been impossible because the internet as we know it didn't exist and computers were prohibitively expensive and had less computing power than that Samsung that you mentioned.

"There's nothing you can do if you're too scared to try." - Nickel Creek

Mar 8, 2017

Let's bring back the 00's

Mar 8, 2017

This 1000x. Just because we have quickly become acclimated to the newest bits of tech does not mean that it has not made unfathomably tremendous advances in the past 30 years.

Mar 10, 2017
phantom113:

This 1000x. Just because we have quickly become acclimated to the newest bits of tech does not mean that it has not made unfathomably tremendous advances in the past 30 years.

My statement is not based on my personal emotions. It's a fact that technology in communications and for other personal needs improved human interaction during the turn of the 20th century. The smart phone is more like the full grown adult, rather than a new born tool for communication.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

Mar 8, 2017

agreed, have been reading a lot of charles hugh smith's blog http://www.oftwominds.com/blog.htmland his short book why our status quo failed really opened my eyes to this. eventually robots will replace mass amounts of minimum wage workers, it's definitely coming IMO, though I still think it's ways out. by the time this happens our system will be on the verge of collapse.... until then will enjoy life, watch the next bubble burst and another round of QE....

recently been reading more about the cycles of civilizations, ages of discord, the fourth turning and war peace and war: rise and fall of empires all look to be interesting reads IMO. I think once robots start replacing minimum wage workers in bulk, this has a serious chance of causing a Civil War...

"He profits most who serves best"

"Every failure brings with it the seed of an equivalent advantage"

*Mark 11:24

stoictrader.net

Mar 8, 2017

So what's the end-game? Socialism or YouTube/IG entrepreneurship?

Absolute truths don't exist... celebrated opinions do.

Mar 9, 2017

How does a Telsa crashing due to a glitch somehow proves that automation always fails?

Mar 10, 2017
Wolfofgeorgestreet:

How does a Telsa crashing due to a glitch somehow proves that automation always fails?

It's not proof of anything. Simply, remember that Tesla is not even 'Tech' in the first place. It's a car manufacturer. This industry has no rules, and people can't decide how to value anything because no one knows what the future holds. TBH, there's more emotion in these investments than rational thought. Granted there's high growth potential, which is reasonably difficult to measure.

"Loser terrorists" & "bad hombres"

"Typical candidates are those who attended a top-tier academic institution"
-Most job applications

Mar 8, 2017

I have similar thoughts mainly because there are so many dinosaurs in finance. couple that with the fact most kids in their twenties are trying to go work for tech companies and it definitely makes sense. this talk makes me want to go get my MBA sooner than later (28 and a 4yr vet)..

"He profits most who serves best"

"Every failure brings with it the seed of an equivalent advantage"

*Mark 11:24

stoictrader.net

Mar 8, 2017

Bring back inflation and higher interest rates! It's just so filthy miserable the economy these days. People don't make extra money the year after and IMO the behavioral effects can be gigantic. Statistics may show different story and the monetarists may be happy but the feeling of getting a raise? that your revenues increased, maybe more than your debt? your profits increased? yeaaaaaah, better than sex.

Put it this way, any day is good day to have an inlfation tax, than having stagnant sales and mischevious austrians saying "the allocation of capital needs to change and fed omg 666 blablabla" (read: i want to see you fail because I still haven't recovered from getting bullyied at school)

Colourful TV, colourless Life.

Mar 8, 2017

Score one for the non-targets trying to break in.

Mar 8, 2017

If technology is so great, does that mean online degrees have more value? ;)

Only two sources I trust, Glenn Beck and singing woodland creatures.

Mar 8, 2017

Spoken like a true trader.

Mar 9, 2017

Jared, for once, you're 5-10 years behind.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Mar 9, 2017

Take a look around the trading floor. My guess is that the average age is over 40. That's not normal.

Well I'm at work right now and all our MDs are under that age so I'm not sure where you're getting your info.

Mar 9, 2017
tradingonwheels:

Take a look around the trading floor. My guess is that the average age is over 40. That's not normal.

Well I'm at work right now and all our MDs are under that age so I'm not sure where you're getting your info.

Twitter, dude! #alternativefacts #datadrivensucks

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Mar 9, 2017

How is it getting worse? Bank profits are higher than they have ever been.

Mar 9, 2017

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